Oil prices have surpassed $90 a barrel for the first time as the falling dollar drew new foreign investors and speculators to dollar-denominated energy futures.
Light, sweet crude for November delivery hit $90,02 in electronic trading late on Thursday evening before returning to about $89,60. Earlier, prices had risen by $2,07 to settle at a record $89,47 on the New York Mercantile Exchange.
While oil prices have risen sharply in dollar terms in recent days, the steadily weakening dollar means oil futures are seen as a bargain overseas. Data released in recent weeks shows speculative buying of oil futures is on the rise. Buying by foreign investors sends prices up, which draws more speculators into the market.
”It becomes a self-fulfilling prophecy,” said Brad Samples, commodities analyst at Summit Energy Services in Louisville, Kentucky.
Many analysts feel that the underlying fundamentals of supply and demand do not support oil prices of $90 a barrel. On Wednesday, the United States Energy Department reported that oil and petrol supplies rose more than expected last week, countering suggestions that supplies are tight.
”Fundamental reasons, we’re kind of running out of them,” said James Cordier, president of Liberty Trading Group in Tampa, Florida. ”The main driving factor today is … the dollar making an all-time low against the euro.”
However, crude supplies at the closely watched Nymex delivery point of Cushing, Oklahoma, fell last week. And several reports in recent days have predicted oil supplies will tighten in the fourth quarter.
Thursday was the fifth day in a row crude prices had set new records. Despite the gains, the price of oil is still below inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to $101 or more today.
In London, December Brent crude rose by $1,47 to settle at $84,60 a barrel on the ICE Futures exchange.
Some analysts think oil prices are nearing a seasonal peak and will soon begin to fall.
”It’s hard to pick a top in a raging bull market, but it’s possible that we are close,” said Phil Flynn, an analyst at Alaron Trading Group in Chicago in a research note. — Sapa-AP